SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
QUANTUM CORPORATION
(Name of Registrant as Specified In Its Charter)
JOSEPH T. RODGERS
Executive Vice President, Finance
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
_______________________________________________________________
2) Aggregate number of securities to which transaction applies:
_______________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11.
_______________________________________________________________
4) Proposed maximum aggregate value of transaction.
_______________________________________________________________
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
_______________________________________________________________
2) Form, Schedule or Registration Statement No.:
_______________________________________________________________
3) Filing Party:
_______________________________________________________________
4) Date Filed:
_______________________________________________________________
QUANTUM CORPORATION
-----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JULY 28, 1994
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Quantum
Corporation (the "Company" or "Quantum"), a Delaware corporation, will be held
on July 28, 1994 at 3:00 p.m., local time, at Quantum Corporation's Corporate
headquarters, 500 McCarthy Boulevard, Milpitas, California 95035, for the
following purposes:
1. To elect six directors to serve until the next Annual Meeting of
Stockholders or until their successors are elected and qualified;
2. To approve and ratify an amendment to the Company's Employee Stock
Purchase Plan for the purpose of increasing the number of shares reserved
for issuance thereunder by 2,000,000 shares;
3. To approve and ratify the adoption of the Annual Incentive Plan for the
Company's Chief Executive Officer;
4. To ratify the appointment of Ernst and Young as independent auditors
of the Company for the fiscal year ending March 31, 1995; and
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on June 1, 1994 are
entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting, you are urged to vote,
sign, and return the enclosed Proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she previously returned a Proxy.
Sincerely,
Joseph T. Rodgers
Executive Vice President, Finance,
Chief Financial Officer and Secretary
Milpitas, California
June 16, 1994
QUANTUM CORPORATION
------------------
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of Quantum Corporation (the
"Company") for use at the Annual Meeting of Stockholders to be held July 28,
1994 at 3:00 p.m., or at any adjournment thereof, for the purposes set forth
herein and in the accompanying Notice of Annual Meeting of Stockholders. The
Annual Meeting will be held at the Company's headquarters located at 500
McCarthy Boulevard, Milpitas, California 95035. The Company's telephone number
is (408) 894-4000.
These proxy solicitation materials were mailed on or about June 16, 1994
to all stockholders entitled to vote at the meeting.
RECORD DATE; OUTSTANDING SHARES
Stockholders of record at the close of business on June 1, 1994 (the
"Record Date") are entitled to notice of and to vote at the meeting. At the
Record Date, 44,752,001 shares of the Company's Common Stock, $0.01 par value,
were issued and outstanding. The closing price of the Company's Common Stock
on the Record Date, as reported by NASDAQ was 16-5/8 per share.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company a written
notice of revocation or a duly executed proxy bearing a later date or by
attending the meeting and voting in person.
VOTING AND SOLICITATION
On all matters other than the election of directors, each share has one
vote. See ELECTION OF DIRECTORS--Required Vote.
The cost of soliciting proxies will be borne by the Company. The Company
has retained the services of Corporate Investors Communications, Inc. (the
"Solicitor") to aid in the solicitation of proxies. The Company estimates that
it will pay the Solicitor a fee not to exceed $6,500 for its services and will
reimburse the Solicitor for certain out-of-pocket expenses. In addition, the
Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
material to such beneficial owners. Proxies may also be solicited by certain
of the Company's directors, officers and regular employees, without additional
compensation, personally or by telephone, telegram, telefax or otherwise.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be
presented by such stockholders at the Company's 1995 Annual Meeting must be
received by the Company no later than February 16, 1995 in order that they may
be included in the proxy statement and form of proxy relating to that meeting.
1
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting
is a majority of the votes eligible to be cast by holders of shares of Common
Stock issued and outstanding on the Record Date. Shares that are voted "FOR",
"AGAINST" or "WITHHELD FROM" a matter are treated as being present at the
meeting for purposes of establishing a quorum and are also treated as shares
entitled to vote at the Annual Meeting (the "Votes Cast") with respect to such
matter.
While there is no definitive statutory or case law authority in Delaware
as to the proper treatment of abstentions, the Company believes that
abstentions should be counted for purposes of determining both (i) the
presence or absence of a quorum for the transaction of business and (ii) the
total number of Votes Cast with respect to a proposal (other than the election
of directors). In the absence of controlling precedent to the contrary, the
Company intends to treat abstentions in this manner. Accordingly, abstentions
will have the same effect as a vote against the proposal.
In a 1988 Delaware case, Berlin v. Emerald Partners, the Delaware Supreme
Court held that, while broker non-votes should be counted for purposes of
determining the presence or absence of a quorum for the transaction of
business, broker non-votes should not be counted for purposes of determining
the number of Votes Cast with respect to a particular proposal on which the
broker has expressly not voted. Accordingly, the Company intends to treat
broker non-votes in this matter. Thus, a broker non-vote will not affect the
outcome of the voting on a proposal.
2
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
A Board of six directors is to be elected at the meeting. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for
management's six nominees named below. In the event that any management nominee
is unable or declines to serve as a director at the time of the Annual Meeting,
the proxies will be voted for any nominee who shall be designated by the present
Board of Directors to fill the vacancy. It is not expected that any nominee will
be unable or will decline to serve as a director. In the event that additional
persons are nominated for election as directors, he proxy holders intend to vote
all proxies received by them in such a manner in accordance with cumulative
voting as will ensure the election of as many of the nominees listed below as
possible. In such event, the specific nominees for whom such votes will be
cumulated will be determined by the proxy holders. The term of office of each
person elected as a director will continue until the next Annual Meeting of
Stockholders or until his successor has been elected and qualified.
The name and certain information regarding each nominee is set forth
below.
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- - --------------- --- -------------------- -----
Stephen M. Berkley 50 Chairman of Coactive Computer Corporation; management consultant 1987
for various high technology companies
David A. Brown 49 Founder and Director of Quantum; management consultant for 1988
various high technology companies
Robert J. Casale 55 Group President, Brokerage Information Services Group of 1993
Automatic Data Processing, Inc.
Edward M. Esber, Jr. 42 Chairman, President and Chief Executive Officer of Creative 1988
Insights, Inc.
William J. Miller 48 Chairman of the Board and Chief Executive Officer of Quantum 1992
Steven C. Wheelwright 50 Professor of Management at the Graduate School of Business, 1989
Harvard University
Except as set forth below, each of the nominees has been engaged in his
principal occupation described above during the past five years. There is no
family relationship between any director or executive officer of the Company.
Mr. Berkley joined the Company in October 1981, as Vice President,
Marketing. In November 1983, he became the founding President and Chief
Executive Officer of Plus Development Corporation, previously a wholly owned
subsidiary of the Company. From May 1987 to March 1992, he served as Chairman
of the Board and Chief Executive Officer of Quantum. From April 1992 to July
1993 he served as Chairman of the Board of Quantum. Since May 1992, Mr.
Berkley has served as a consultant to several high technology firms and since
February 1993, Mr. Berkley has served as Chairman of Coactive Computer
Corporation, a computer networking company.
Mr. Brown, a founder of the Company, has been with the Company since its
inception in February 1980. Initially, Mr. Brown served as Vice President of
Engineering of the Company. In 1983, he became co-founder and Executive Vice
President of Operations at Plus Development Corporation. He returned to
Quantum in September 1986 to lead the engineering organization and direct
Quantum's effort in the 3-1/2-inch disk drive market. From May 1987 to February
1992, Mr. Brown served as
3
President and Chief Operating Officer of the Company. From April 1990 to
February 1992, he also served as Vice Chairman of the Board of Directors.
Since February 1992, Mr. Brown has been a management consultant and Board
member for various high technology companies. He is also a member of the Board
of Directors of Digidesign.
Mr. Casale is a former Director and current Group President of the
Brokerage Information Services Group of Automatic Data Processing, Inc. since
February 1988. From 1986 to February 1988, he was a Managing Director with
Kidder Peabody and Company, Inc. Mr. Casale was employed by American Telephone
& Telegraph Co. ("AT&T") from 1975 to 1986, serving in various management
positions, concluding with Executive Vice President of AT&T Information
Systems.
Mr. Esber was named Chairman, President and Chief Executive Officer of
Creative Insights, Inc. in March 1994. From May 1993 to May 1994, he was
President and Chief Operating Officer of Creative Labs, Inc. From February
1991 to May 1993, he was President of the Esber Group, a consulting firm. From
May 1984 to February 1991, Mr. Esber was employed by Ashton-Tate Company,
serving as Chief Executive Officer from October 1984 to August 1986, Chief
Executive Officer and Chairman from August 1986 to May 1990, and Vice Chairman
from May 1990 to February 1991. He is also a member of the Board of Directors
of Magic Software, Inc.
Mr. Miller joined the Company in March 1992 as Chief Executive Office and
as a member of the Board of Directors. Mr. Miller became Chairman of the Board
and Chief Executive Officer in July 1993. He previously served for 11 years at
Control Data Corporation ("CDC"), where he was most recently Executive Vice
President, and President of Information Services. He also served as President
and Chief Executive Officer of Imprimis Technology, formerly a subsidary of
CDC.
Mr. Wheelwright has served as a professor of management at the Graduate
School of Business, Harvard University since August 1988. Mr. Wheelwright
additionally served in the same position from August 1985 to August 1986. From
August 1986 to August 1988, Mr. Wheelwright served as a professor at Stanford
University. Mr. Wheelwright is also a member of the Board of Directors of T.J.
International Corporation and Allegheny-Ludlum Steel Corporation.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of eight (8) meetings
during the fiscal year ended March 31, 1994.
During the fiscal year ended March 31, 1994, no director attended fewer
than 75% of the meetings of the Board of Directors or the meetings of
committees, if any, upon which such director served.
The Audit Committee of the Board of Directors, which was formed in March
1983, currently consists of Mr. Esber, Chairman of the Committee, Mr.
Wheelwright and Mr. Casale. The Audit Committee, which generally meets prior
to quarterly earnings releases, recommends engagement of the Company's
independent auditors and is primarily responsible for approving the services
performed by the Company's independent auditors and for reviewing and
evaluating the Company's accounting principles and its systems of internal
accounting controls. The Audit Committee held a total of four (4) meetings
during the fiscal year ended March 31, 1994.
The Compensation Committee, which was formed in November 1988, is
currently composed of Mr. Wheelwright, Chairman of the Committee, Mr. Esber
and Mr. Casale. The Compensation Committee, which meets in conjunction with
Board meetings, reviews and approves the Company's executive compensation
policy and makes recommendations concerning the Company's employee benefit
policies. The Compensation Committee held a total of four (4) meetings during
the fiscal year ended March 31, 1994.
The Board of Directors does not have a Nominating Committee nor any
committee performing such function.
DIRECTOR COMPENSATION
During the year ended March 31, 1994 each director who was not an employee
("Outside Director") received an annual retainer of $27,000 per year. Certain
directors were paid an additional $4,000 per
4
year for chairing a committee of the Board. In addition, each Outside Director
was paid $1,000 per day for any Board meeting attended. Members of Board
committees receive $750 per meeting for meetings held on days when there was
no regularly scheduled Board meeting. Outside Directors may also receive
consulting fees for projects completed at the request of management. Employee
directors are not compensated for their service on the Board of Directors or
on committees of the Board.
Options may be granted to Outside Directors under the 1986 Stock Option
Plan only in accordance with an automatic, non-discretionary grant mechanism.
The 1986 Stock Option Plan provides that since May 1, 1991 (the "Effective
Date"), each of the Company's Outside Directors who were directors on the
Effective Date shall automatically be granted options to purchase 7,500 shares
of Common Stock on the date of each Annual Meeting of Stockholders, which
options commence vesting on April 1 of the year which is three years from the
year of the grant of such option and vest in installments cumulatively with
respect to one-twelfth (1/12) of the shares subject thereto per month on the
first day of each month thereafter. Each Outside Director appointed or
elected after the Effective Date ("Future Outside Director") shall receive
a one-time option grant of 30,000 shares on the date of his or her
appointment or election (the "Initial Option"), 7,500 shares of which
shall vest on the first day of the month which is one (1) year from the
month in which the Initial Option was granted, and the balance of which
shall vest ratably on a monthly basis on the first day of each month
over the next succeeding 36-month period. Additionally, each Future
Outside Director shall be granted an option (the "Subsequent Option")
to purchase 7,500 shares on the date of each Annual Meeting of
Stockholders which is held at least six (6) months from the date of su
Outside Director's appointment or election, which Subsequent Option shall vest
ratably on a monthly basis over a 12-month period commencing on the month
immediately following the month in which the preceding options, whether the
Initial Option or a Subsequent Option, becomes fully vested. All options granted
to Outside Directors contain the following provisions: the term of the option is
ten (10) years; the option can be exercised only while the Outside Director
remains a director or within ninety (90) days after ceasing to be a director;
and the exercise price per share of Common Stock is 100% of the fair market
value on the date the option is granted. The provisions governing options
granted to Outside Directors may not be amended more than once every six (6)
months.
During fiscal 1994, two of the Company's Outside Directors, Mr. Esber and
Mr. Wheelwright received an option to purchase 7,500 shares of Common Stock at
an exercise price of $12.25 per share and Mr. Casale received an initial
option of 30,000 shares of Common Stock at an exercise price of $12.125 per
share.
REQUIRED VOTE
The six nominees for director receiving the highest numer of affirmative
votes of the shares entitled to be voted for them shall be elected as
directors. Votes withheld from any director are counted for purposes of
determining the presence or absence of a quorum, but have no other legal
effect under Delaware law. Every stockholder voting for the election of
directors may cumulate such stockholder's votes and give one candidate a
number of votes equal to the number of directors to be elected multiplied by
the number of votes to which the stockholder's shares are entitled, or may
distribute the stockholder's votes on the same principle among as many
candidates as the stockholder thinks fit, provided that votes cannot be cast
for more than six candidates. No stockholder shall be entitled to cumulate
votes, however, unless the candidates have been properly placed in
nomination according to the Company's Bylaws and notice of the
intention to cumulate votes is given to the Company and other stockholders at
least twenty (20) and no more than sixty (60) days prior to the Annual Meeting.
The Company will exercise discretionary authority to cumulate votes in the event
that additional persons are nominated at the Annual Meeting for election of
directors.
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES LISTED ABOVE.
5
PROPOSAL TWO
AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN
In May 1994, the Board of Directors approved an amendment to the Purchase
Plan to increase the number of shares reserved for issuance thereunder from
4,300,000 to 6,300,000 shares of Common Stock.
Certain features of the Purchase Plan, as amended, are outlined below.
GENERAL
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Section 423 of the
Code.
PURPOSE
The purpose of the Purchase plan is to provide employees of the Company and
its majority-owned subsidiaries which have been designated by the Board with an
opportunity to purchase Common Stock of the Company through accumulated payroll
deductions.
ADMINISTRATION
The Purchase Plan is to be administered by the Board or a committee appointed
by the Board. At the present time, no committee has been appointed by the Board.
The administration, interpretation or application of the Plan by the Board or
its committee shall be final, conclusive and binding upon all participants.
Members of the Board who are eligible employees are permitted to participate in
the Purchase Plan provided that members of the Board who are eligible to
participate in the Purchase Plan may not vote on any matter affecting the
administration of the Plan or grant any option pursuant to the Purchase Plan or,
if a committee is established to administer the Purchase Plan, no member of the
Board who is eligible to participate in the Purchase Plan may be a member of the
committee.
ELIGIBILITY AND PARTICIPATION
Any person who is regularly employed at least 20 hours per week by the
Company (or by any of its designated subsidiaries) on the first day of each
offering period is eligible to participate in the Purchase Plan. Eligible
employees become participants in the Purchase Plan by completing a subscription
agreement authorizing a payroll deduction on the form provided by the Company
and filing it with the Company's payroll office prior to the applicable
Enrollment Date, unless a later time for filing the subscription agreement is
set by the Board for all eligible Employees with respect to a given Offering
Period. As of the Record Date, there were 2,352 employees eligible to
participate in the Purchase Plan, of whom 1,507 were participating.
OFFERING DATES
Generally, the Purchase Plan is implemented by means of a two-year offering
period, starting every six months, with six-month exercise periods within each
offering period. The Board of Directors has the power to change the duration
of the offering periods and exercise periods with respect to future offerings
without stockholder approval, if such change is announced at least fifteen
(15) days prior to the scheduled beginning of the first offering period to be
affected.
PURCHASE PRICE
The option price per share of the shares offered in a given offering period
shall be the lower of (i) 85% of the fair market value of a share of the
Common Stock of the Company at the commencement of the offering period or (ii)
85% of the fair market value of a share of Common Stock of the Company on the
last day of the applicable six-month exercise period within the offering
period.
6
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of shares is accumulated by payroll deductions over the
offering period. The deductions may not exceed 10% of a participant's
compensation. A participant may discontinue participation in the Purchase Plan,
or may change the rate of payroll deductions by giving written notice to the
Company authorizing the change. The change becomes effective (i) in the case of
a decrease in rate, with the first payroll following notification, and (ii) in
the case of an increase in rate, at the beginning of the next six-month exercise
period within the two-year offering period following notification. Payroll
deductions shall commence on the first payroll date following the offering date
and shall end on the last payroll date to which such authorization is
applicable, unless sooner terminated as provided in the Purchase Plan.
All payroll deductions made for a participant shall be credited to his/her
account under the Purchase Plan. A participant may not make any additional
payments into such account.
PURCHASE OF STOCK; EXERCISE OF OPTION
By executing a subscription agreement to participate in the Purchase Plan,
the employee is entitled to have shares placed under option to him/her. The
maximum number of shares placed under the option to a participant in any
exercise period is the number determined by dividing the total amount of his
compensation which is to be withheld for the exercise period by 85% of the fair
market value of the Common Stock at the beginning of the offering period or end
of the exercise period, whichever is less. See "Payment of Purchase Price;
Payroll Deductions" for limitations on payroll deductions. Unless the employee's
participation is discontinued, his/her option for the purchase of shares will be
exercised automatically at the end of each exercise period at the applicable
price. See "Withdrawal."
Notwithstanding the foregoing, to the extent necessary to comply with Section
423(b)(8) of the Code, no employee shall be granted an option under the Purchase
Plan if, immediately after the grant of the option, the employee would own
shares and/or hold outstanding options to purchase stock possessing 5% or more
of the total combined voting power or value of all classes of shares of the
Company or of any designated subsidiary of the Company, nor shall any employee
be granted an option which would permit him or her to buy more than $25,000
worth of stock (determined at the fair market value of the shares at the time
the option is granted) under the Purchase Plan in any calendar year.
WITHDRAWAL
A participant's interest in a given offering may be terminated in whole, but
not in part by signing and delivering to the Company a notice of withdrawal from
the Purchase Plan. Such withdrawal may be elected at any time prior to the end
of the applicable offering period. A participant's withdrawal from an offering
does not have any effect upon such participant's eligibility to participate in
subsequent offerings under the Purchase Plan.
Termination of a partcipant's employment for any reason, including retirement
or death, cancels the participant's participation in the Purchase Plan
immediately. In such event, the payroll deductions credited to the participant's
account will be returned to such participant or to his or her beneficiaries.
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors of the Company may at any time amend or terminate the
Purchase Plan. No such termination can affect options previously granted, nor
may an amendment make any changes in an option theretofore granted which
adversely affects the rights of any participant. No amendment may be made to the
Purchase Plan without approval of the stockholders of the Company if such
amendment would increase the number of shares that may be issued under the
Purchase Plan, permit payroll deductions at a rate in excess of 10% of a
participant's compensation, materially modify the requirements as to eligibility
for participation in the Purchase Plan, or materially increase the benefits
which may accrue to participants under the Purchase Plan.
AUTOMATIC TRANSFER TO LOW PRICE OFFERING PERIOD
In the event that the fair market value of the Company's Common Stock on the
first day of an offering period exceeds the fair market value of the Company's
Common Stock on the first day of any
7
subsequent offering period commencing immediately following an exercise date
within the offering period in progress, then each participant in the offering
period in progress is deemed to have withdrawn from such offering period
immediately following the exercise of his or her option on such exercise date
and to have enrolled in such subsequent offering period as of the first day
thereof.
TAX INFORMATION
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and 423
of the Code. Under these provisions, no income will be taxable to a participant
until the shares purchased under the Plan are sold or otherwise disposed of.
Upon sale or other disposition of the shares, the participant will generally be
subject to tax and the amount of tax will depend upon the holding period. If the
shares are sold or otherwise disposed of more than two years from the first day
of the offering period and one year from the date the shares are purchased, the
participant will recognize ordinary income measured as the lesser of (a) the
excess of the fair market value of the shares at the time of such sale or
disposition over the purchase price, or (b) an amount equal to 15% of the fair
market value of the shares as of the first day of the offering period. Any
additional gain will be treated as long-term capital gain. If the shares are
sold or otherwise disposed of before the expiration of these holding periods,
the participant will recognize ordinary income generally measured as the excess
of the fair market value of the shares on the date the shares are purchased over
the purchase price. Any additional gain or loss on such sale or disposition will
be long-term or short-term capital gain or loss, depending on the holding
period. The Company is not entitled to a deduction for amounts taxed as ordinary
income or capital gain to a participant except to the extent of ordinary income
recognized by participants upon a sale or disposition of shares prior to the
expiration of the holding periods described above.
The foregoing is only a summary of the effect of federal income taxation upon
the participant and the Company with respect to the shares purchased under the
Purchase Plan. Reference should be made to the applicable provisions of the
Code. In addition, the summary does not discuss the tax consequences in the
event of a participant's death or the income tax laws of any state or foreign
country in which the participant may reside.
8
PARTICIPATION IN THE EMPLOYEE STOCK PURCHASE PLAN
Participation in the Employee Stock Purchase Plan (the "Purchase Plan") is
voluntary and is dependent on each eligible employee's election to participate
and his or her determination as to the level of payroll deductions.
Accordingly, future purchases under the Purchase Plan are not determinable.
Non-employee directors are not eligible to participate in the Purchase Plan.
No purchases have been made under the Purchase Plan since its amendment by the
Board. However, purchases were made under the Purchase Plan prior to such
amendment. The following table sets forth certain information regarding shares
purchased under the Purchase Plan during the last fiscal year for each of the
named officers, for all current executive officers as a group and for all
other employees who participated in the purchase plan as a group:
AMENDED PLAN BENEFITS
EMPLOYEE STOCK PURCHASE PLAN
NAME OF INDIVIDUAL NUMBER OF DOLLAR
OR IDENTITY OF GROUP SHARES VALUE
AND POSITION DATE PURCHASED (#) ($)(1)
------------ ---- ------------- ------
William J. Miller July 23, 1993 105 $ 158
January 25, 1994 2,500 17,812
Michael A. Brown July 23, 1993 620 930
January 25, 1994 1,838 13,096
Joseph T. Rodgers July 23, 1993 735 1,103
January 25, 1994 1,764 12,568
William F. Roach July 23, 1993 0 0
January 25, 1994 0 0
Kenneth Lee July 23, 1993 1,765 2,648
January 25, 1994 1,956 13,937
All current executive officers
as a group July 23, 1993 7,164 10,746
January 25, 1994 10,982 78,247
All other employees
as a group July 23, 1993 357,091 535,637
January 25, 1994 359,577 2,561,986
- - ---------------
(1) Market value of shares on date of purchase, minus the purchase price under
the Plan.
REQUIRED VOTE
The affirmative vote of a majority of the votes cast will be required to
approve the amendment of the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL AND
RATIFICATION OF THE AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN.
9
PROPOSAL THREE
APPROVAL OF THE ANNUAL INCENTIVE
PLAN FOR THE COMPANY'S CHIEF EXECUTIVE OFFICER
The Compensation Committee (the "Committee") of the Board of Directors has
adopted, subject to stockholder approval, an Annual Incentive Plan (the
"Plan") for the Chief Executive Officer ("CEO") of the Company. The payment of
the compensation (the "Bonus") will depend on the Company's market share and
return on total capital (the "Targets") for the fiscal year ending March 31,
1995 achieving levels established by the Committee. The Plan has the same
structure as the incentive plan for other executives except the Board has no
discretion to increase payments in the Plan. Stockholder approval of the Bonus
is necessitated by the recent enactment of Section 162(m) of the Internal
Revenue Code of 1986, as amended, which provides a $1,000,000 cap on
deductions by any publicly-held corporation for certain compensation paid to
the CEO effective for taxable years beginning on or after January 1, 1994.
The CEO is the only person eligible to participate in the Plan. The Bonus is
designed to reward the CEO to the extent the Company achieves certain targets.
If the Company's Targets are above certain specified levels, the CEO will be
eligible to receive a bonus in a predetermined amount ranging from $118,125 to
a maximum of $1,119,938. If the Company's minimum targets are not met, no
Bonus will be paid to the CEO.
The following table summarizes the maximum Bonus that will be payable to the
CEO assuming the highest Target levels are met.
NEW PLAN BENEFITS
NAME AND POSITION DOLLAR VALUE ($)
---------------- ---------------
William J. Miller
Chairman of the Board and Chief Executive Officer $1,119,938
The Bonus is to be paid in cash upon approval by the Committee. The Committee
will be responsible for certifying the results achieved to determine the amount
of the Bonus.
REQUIRED VOTE
The affirmative vote of a majority of the votes cast will be required to
approve the adoption of the Annual Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE ANNUAL
INCENTIVE PLAN.
10
PROPOSAL FOUR
INDEPENDENT AUDITORS
In May 1994, the Board of Directors of the Company adopted a resolution
whereby Ernst & Young was selected as the Company's independent auditors to
audit the financial statements of the Company for the fiscal year ending March
31, 1995.
A representative of Ernst & Young is expected to be available at the Annual
Meeting to make a statement if such representative desires to do so and to
respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG AS THE INDEPENDENT AUDITORS FOR THE 1995 FISCAL
YEAR.
OTHER INFORMATION
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's executive officers,
directors, and persons who own more than 10% of a registered class of the
Company's equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission.
Based solely on its review of the copies of such forms received by the
Company, or on written representations from certain reporting persons that no
other reports were required for such persons, the Company believes that, during
the fiscal year ended March 31, 1994, all filing requirements applicable to its
executive officers and directors were complied with except that Vice President,
Kenneth F. Potashner, amended one Statement of Changes in Beneficial Ownership
to report a late transaction and former Vice President, Bennet Goldberg, filed
one Statement of Changes in Beneficial Ownership late.
CERTAIN TRANSACTIONS
In March 1992, the Company loaned $150,000 to William F. Roach, Executive
Vice President of Worldwide Sales, to purchase a house. This loan was interest
bearing at 8.625%. The largest outstanding balance of this loan during the
fiscal year was $164,015. The loan was paid in full in February 1994. In
addition, in October 1985, the Company loaned $9,000 to Mr. Roach. This loan was
a personal loan and was interest bearing at 8.39%. The largest outstanding
balance of this loan during the fiscal year was $15,355. The outstanding balance
of this loan at the record date was $15,481.
11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of June 1, 1994 certain information with
respect to the beneficial ownership of the Company's Common Stock by each
person known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock, by each director, by each of the executive
officers named in the Summary Compensation Table, and by all directors and
executive officers as a group.
APPROXIMATE
NAME AMOUNT OWNED PERCENTAGE OWNED
---- ------------ ----------------
Fidelity Management and Research Company
82 Devonshire Street
Boston, MA 02109-3014 5,362,000 11.81%
The Capital Group, Inc.
333 South Hope Street
Los Angeles, CA 90071 2,614,800(1) 5.76%
William J. Miller 168,346(3) *
Michael A. Brown 111,672(2) *
Kenneth Lee 74,752(2) *
Stephen M. Berkley 61,619(3) *
Steven C. Wheelwright 49,875(2) *
Joseph T. Rodgers 42,170(2) *
William F. Roach 27,421(2) *
David A. Brown 6,562(2) *
Edward M. Esber, Jr. 5,625(2) *
Robert J. Casale 0 *
All directors and executive officers
as a group (15 persons) 655,789(4) 1.44%
- - ----------------
* Less than 1%.
(1) Amount owned based upon the most recent available Form 13G filings with the
Securities and Exchange Commission as of December 31, 1993.
(2) Represents shares subject to stock options exercisable at June 1, 1994 or
within sixty (60) days thereafter.
(3) Includes 164,061 shares and 57,081 shares subject to stock options held by
Mr. Miller and Mr. Berkley, respectively, which were exercisable at June 1,
1994 or within sixty (60) days thereafter.
(4) Includes 638,675 shares subject to stock options held by officers and
directors which were exercisable at June 1, 1994 or within sixty (60) days
thereafter.
12
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows, as to the Chief Executive Officer and each of the
four other most highly compensated executive officers whose salary plus bonus
exceeded $100,000, information concerning compensation paid for services to
the Company in all capacities during the fiscal year ended March 31, 1994, as
well as the total compensation paid to each such individual for the Company's
previous two fiscal years (if such person was the Chief Executive Officer or
an executive officer, as the case may be, during any part of such fiscal
year).
ANNUAL COMPENSATION LONG-TERM
(1)(2) COMPENSATION(1)
------------------- --------------
(A) (B) (C) (D) (G)
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS/SARS(#)(1)
- - --------------------------- ---- --------- -------- ------------------
William J. Miller 1994 $516,976 $ 0 125,000
Chairman of the Board and 1993 400,058 536,610 400,000
Chief Executive Officer 1992 6,080 0 0
Michael A. Brown 1994 329,228 0 75,000
President, Desktop and 1993 258,495 259,650 172,810
Portable Storage Group 1992 162,924 42,000 20,000
Joseph T. Rodgers 1994 298,149 0 50,000
Executive Vice President, 1993 273,781 264,635 50,000
Finance, Chief Financial 1992 251,068 60,000 50,000
Officer and Secretary
William F. Roach 1994 283,607 0 50,000
Executive Vice President, 1993 201,464 157,659 70,000
World-Wide Sales 1992 183,981 55,000 20,000
Kenneth Lee 1994 276,389 0 50,000
Executive Vice President, 1993 199,929 124,632 70,000
Technology and Engineering, 1992 172,167 60,000 20,000
Chief Technical Officer
<FN>
-----------------
(1) The Company has not granted any stock appreciation rights or restricted
stock awards and does not have any Long-Term Incentive Plans as that term
is defined in regulations promulgated by the Securities and Exchange
Commission (the "SEC"). Additionally, the Company has not paid any Other
Compensation, as defined in the regulations promulgated by the SEC, to the
executive officers named in this table. Therefore, the Other Compensation
column has not been included in this table.
(2) The value of perquisites fell below the lesser of $50,000 or 10% of
reported base and bonus for each executive. Therefore, the Other Annual
Compensation column has not been included in this table.
STOCK OPTION GRANTS AND EXERCISES
The following tables set forth the stock options granted to the named
executive officers under the Company's stock option plans and the options
exercised by such named executive officers during the fiscal year ended March
31, 1994.
13
The Option Grant Table sets forth hypothetical gains for the options at the
end of their respective ten (10)-year terms, as calculated in accordance with
the rules of the Securities and Exchange Commission. Each gain is based on an
arbitrarily assumed annualized rate of compound appreciation of the market price
of 5% and 10%, less the exercise price, from the date the option was granted to
the end of the option term. Actual gains, if any, on option exercises are
dependent on the future performance of the Company's Common Stock.
STOCK OPTION GRANTS IN FISCAL YEAR 1994
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
--------------------------------------------- ----------------------
(A) (B) (C) (D) (E) (F) (G)
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTION EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
---- ---------- ----------- --------- ------- ------ -------
William J. Miller 125,000(2) 4.66% $9.875 10/11/03 $781,250 $1,968,750
Michael A. Brown 75,000(2) 2.80 9.875 10/11/03 468,750 1,181,250
Joseph T. Rodgers 50,000(2) 1.86 9.875 10/11/03 312,500 787,500
William F. Roach 50,000(2) 1.86 9.875 10/11/03 312,500 787,500
Kenneth Lee 50,000(2) 1.86 9.875 10/11/03 312,500 787,500
<FN>
- - ---------------
(1) Potential realizable value is based on an assumption that the stock price
of the Common Stock appreciates at the annual rate shown (compounded
annually) from the date of grant until the end of the ten (10)-year option
term. Potential realizable value is shown net of exercise price. These
numbers are calculated based on the regulations promulgated by the SEC and
do not reflect the Company's estimate of future stock price growth. The
stock prices utilized for the table showing a 5% and a 10% rate of return
were 16 and 25, respectively.
(2) Options were granted on October 11, 1993 at fair market value, fully
vesting within four (4) years from the grant date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END VALUES
(A) (B) (C) (D) (E)
TOTAL NUMBER OF VALUE OF UNEXERCISED
SHARES VALUE UNEXERCISED OPTIONS HELD IN-THE-MONEY OPTIONS HELD
ACQUIRED ON REALIZED AT FISCAL YEAR END (#) AT FISCAL YEAR END ($)(1)
NAME EXERCISE (#) $ EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------- ----------- ------------ ----------- -------------
William J. Miller 100,000 $437,500 120,312 304,688 $541,402 $1,433,598
Michael A. Brown 40,000 330,833 95,423 182,813 441,300 918,493
Joseph T. Rodgers 74,402 815,928 19,252 144,793 130,960 808,082
William F. Roach 34,298 279,472 11,458 130,340 74,477 662,234
Kenneth Lee 20,000 161,507 58,102 131,027 411,155 668,089
<FN>
- - -------------
(1) Total value of vested options based on fair market value of the Company's
Common Stock of 16-3/8 per share as of March 31, 1994, less the exercise
price.
14
EMPLOYMENT TERMS,
TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
The Board of Directors has authorized and approved agreements (the
"Agreements") with certain officers, including the officers named in the Summary
Compensation Table who are with the Company, whereby in the event there is a
"change of control" of the Company, which is defined in the Agreements to
include, among other things, a merger or sale of assets of the Company or a
reconstitution of the Company's Board of Directors, the exercisability and
vesting of all stock-based compensation awards granted to the officers shall be
accelerated. Under the Agreements, upon a change of control, 50% of the unvested
shares or options to purchase shares held by an officer become exercisable and
the remaining 50% of such unvested shares or options to purchase shares become
vested and exercisable upon the earlier of the date of the first anniversary of
the change of control or upon such officer's "Involuntary Termination" after the
change of control. Under the Agreements, "Involuntary Termination" is defined
to include, among other things, any termination without "cause" by the Company
of the employee without such employee's express written consent or a significant
reduction of or addition to the employee's duties. Additionally, such officers
receive twelve (12) months severance pay and continued health and medical
benefits during the severance period. The purpose of the Agreements is to assure
that the Company will have the continued dedication of its officers by providing
such individuals with certain compensation arrangements, competitive with those
of other corporations, to provide sufficient incentive to the individuals to
remain with the Company, to enhance their financial security, as well as protect
them against unwarranted termination in the event of a change of control.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Robert J. Casale, an Outside Director, joined the Compensation Committee in
fiscal 1994 replacing David A. Brown, who was, until February 1992, President
and Chief Operating Officer of Quantum.
15
COMPENSATION COMMITTEE REPORT
INTRODUCTION
The Compensation Committee of the Board of Directors (the "Committee") is
made up of Outside Directors of the Company. The Committee generally determines
base salary levels and determines targets under the Annual Incentive Plan for
executive officers of the Company at the start of the fiscal year. Each year the
Committee evaluates the Company's compensation practices and equity programs
based on comparisons with other companies in the industry, and compares the
Company's performance to a group of peer companies in making determinations with
respect to compensation plans.
COMPENSATION PHILOSOPHY
The Company's executive compensation policies are designed to attract and
retain experienced and qualified executive officers critical to the success of
the Company, and to provide incentive for such individuals to maximize the
Company's corporate performance and strategic objectives. The target levels of
the executive officers' total compensation package are intended to be
competitive with executives in the Company's industry, taking into account
corporate performance and individual achievement. The Committee has taken
action, where necessary, to preserve the Company's tax deductions for the
compensation paid to its employees. The Committee has taken this action to
comply with Section 162(m) of the Internal Revenue Code.
COMPENSATION PLANS
The components of executive compensation are described below:
Base Compensation. Base salaries for executive officers are set by the
Committee, in consultation with the Chief Executive Officer, after considering
factors such as the competitive environment, experience levels, position and
responsibility, corporate performance and overall contribution levels of the
individuals. The Company obtains competitive salary information from independent
survey sources of companies in competition for similar management talent, which
includes both direct competitors of the Company and other companies in the high
technology industry which have similar size and performance profiles. Most of
the companies included in these surveys are also included in the Hambrecht &
Quist Technology Index (see PERFORMANCE GRAPH). This survey data is then
analyzed by independent consultants and the Company to provide the necessary
information to the Committee.
Annual Incentive Plan. The Annual Incentive Plan provides for cash bonuses to
be paid to executive officers of the Company subject to the Company meeting
certain performance targets set by the Compensation Committee at the beginning
of the fiscal year. The purposes of the Annual Incentive Plan are to (i) tie
compensation to achievement of performance measures that provide an optimum
return on total capital and increase in market share in the current fiscal year
(ii) drive long-term stockholder value creation and (iii) ensure that payments
are targeted to provide a competitive level of compensation, taking into account
the Company's performance against its peers in the disk drive and related
industries. In fiscal 1994, the Company exceeded its target for market share
growth, but did not meet the return on total capital target required for a
payment to be made under the Annual Incentive Plan.
Long-Term Incentive Compensation. The Company's 1986 Stock Option Plan and
1993 Long-Term Incentive Plan provide for long-term incentive compensation for
employees of the Company, including executive officers. Another component of the
total compensation package for the Company's executive officers is in the form
of stock option awards. An important objective of the 1986 Stock Option Plan and
1993 Long-Term Incentive Plan is to align the interest of executive officers
with those of stockholders by providing an equity interest in the Company,
thereby providing incentive for such executive officers to maximize stockholder
value. Option awards directly tie executive compensation to the financial
performance of the Company. The Committee is responsible for determining,
subject to the terms of such Plan, the individuals to whom grants should be
made, the timing of grants, the exercise or purchase price per share and the
number of shares subject to each grant. Grants are
16
determined based on the individual's position in the Company, comparative
market data, and the number of unvested shares already held by each officer. The
option program also utilizes vesting periods to encourage retention of executive
officers and reward long-term commitment to the Company.
COMPANY PERFORMANCE AND CHIEF EXECUTIVE OFFICER COMPENSATION
The process of determining the compensation for the Company's Chief Executive
Officer and the factors taken into consideration in such determination are
generally the same as the process and factors used in determining the
compensation of all of the Company's executive officers. In fiscal 1994, the
Chief Executive Officer did achieve a majority of his individual objectives,
including maintaining the Company's position as the largest independent supplier
of 3-1/2-inch disk drives. The Company exceeded its targets for market share
growth, but did not meet the return on total capital target required for a
payment to be made under the Annual Incentive Plan.
MEMBERS OF THE COMPENSATION COMMITTEE
Steven C. Wheelwright
Edward M. Esber, Jr.
Robert J. Casale
17
PERFORMANCE GRAPH
Set forth below is a line graph comparing the quarterly and annual percentage
change in five-year cumulative total return between Quantum Corporation, the S&P
500 Index and the Hambrecht & Quist Technology Index.
[The following descriptive summary of the graph is supplied
in accordance with Rule 304(d)(2) of Regulation ST]
Period Ended Quantum S&P 500 H&Q Technology
- - ------------ ------- ------- --------------
March 1990 245.06 119.27 111.11
March 1991 448.90 136.46 127.70
March 1992 401.99 151.53 150.31
March 1993 350.45 174.60 164.89
March 1994 450.09 177.17 184.26
Assumes $100 invested on April 1, 1989; through fiscal year ended March
31,1994.
18
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent as
the Company may recommend.
THE BOARD OF DIRECTORS
Dated: June 16, 1994